Political Risk Latin America Blog @PolRiskLatam

Cristina a shoo-in; Argentines flee peso

Posted in News and Articles, Political Risk by politicalrisklatam on June 7, 2011

by Jude Webber for Financial Times – Beyond Brics, June 7th, 2011.

Cristina Fernández, Argentina’s president, has not yet confirmed whether she will run for reelection in October, but with approval ratings that most presidential hopefuls would kill for, and the prospect of coasting to a first round victory, her decision looks like a no-brainer and her ‘keep-them-guessing’ stance seem just an electoral ploy. (In any case, she must announce her intentions by a June 25 deadline.)

So if the uncertainty surrounding elections that usually sparks Argentines to take refuge in the dollar isn’t there, why is capital flight accelerating?

According to La Nación, capital flight could total as much as $17bn this year, well above last year’s $11.4bn.

Estudio Bein & Asociados, a consultancy, highlights the situation in a new report:

Paradoxically, while the economy is enjoying its strongest quarter and for seasonal factors the high supply of dollars in the system coincides with a leap in tax revenues, capital flight has accelerated.

Though the central bank has pursued a policy of stashing away dollars like crazy and prides itself on having a war chest of just over $52bn, Estudio Bein notes that it has stopped accumulating reserves despite a record harvest flooding Argentina with nearly $7.4bn in inflows since early March. (continue reading… )

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